Responding to disruption with digital strategy

We're well into an age of digital disruption. Businesses in all industries are experiencing changes in their competitive environments that result from the use of digital technologies by new market entrants or established companies. These disruptions can undermine the viability of products, service portfolios, and approaches to the market.

The response to digital disruption is to develop a digital strategy. As defined by Jeanne Ross, Principal Research Scientist at MIT Sloan's Center for Information Research, during her recent webinar, Digital Disruption: Transforming your Company for the Digital Economy, digital strategy "is an integrated business strategy inspired by the capabilities of powerful, readily accessible technologies and responsive to constantly changing market conditions."

According to Ross, there are two choices for a successful digital strategy: customer engagement or digitized solutions. Customer engagement requires thinking about an organization's relationship with the customer; it should be one built on trust and loyalty, and ideally, passion. Digitized solutions transform the business model. Both rely on a strong operational backbone. 


Nordstrom's focus on customer engagement and big data

In her INNOVATION@WORK webinar, Ross presented the example of Nordstrom, the upscale fashion retailer founded in 1901. For decades the company was known for its outstanding customer service, but the store's success was being threatened by both online shopping and discount retailers. The company then adopted a digital strategy to provide a personalized, seamless experience across its flagship stores, newly created discount stores such as Nordstrom Rack and Hautelook, and its online properties. This seamless experience is supported by an operational backbone that includes a transparent supply chain. The company has integrated their online and in-store inventory so customers know exactly where and when they can find items and choose how they want to purchase them. They also merged online and in-store shopping experiences via interactive touch screens in fitting rooms. Nordstrom's personal shoppers have access to a customer's purchasing history, allowing for a more customized shopping experience

The company has embraced mobile technology and social media channels. Nordstrom customers can engage with the retailer via an iPhone app, mobile checkout, Pinterest, and Instragram. The company then uses the data provided by these channels and millions of social media followers to enhance customer experiences--for example, tracking Pinterest pins to identify trending products and promote those popular products in their brick and mortar stores. By heavily incentivizing customers to use Nordstrom's credit card and sign up for their Fashion Rewards Program they’re able to collect extensive data on customer purchases and preferences that help them improve marketing and product design, and optimize ad spend.

So how does a company choose which digital strategy path to take? "Companies should look at what's in place--including the operational backbone--and leverage where you think you are stronger and where you think you have the talent to support that strategy," said Ross. "It's not picking the right one that matters, it's delivering on it. Pick one and move, and do it better than anyone else."

Jeanne Ross is Research Director and Principal Research Scientist at MIT Sloan’s Center for Information Systems Research. She teaches in the Executive Education programs Essential IT for Non-IT Executives and Revitalizing Your Digital Business Model. View her complimentary webinar, Digital Disruption: Transforming your Company for the Digital Economy.

This entry was posted in Digital Business on Sat Feb 27, 2016 by MIT Sloan Executive Education


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